'Cash for gold' firms warned to clean up act by OFT

By Lee Boyce
Updated: 10:14 EST, 14 February 2011

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Three 'cash for gold' firms have been told to clean up their act after the OFT found they were melting down jewellery before customers had a chance to reject the valuation offered to them.

London based Cash4Gold, Manchester based CashMyGold and Postal Gold, based in the Isle of Man, have all come under fire from the Office of Fair Trading (OFT) after an investigation into the industry by the watchdog.

When posting off gold for cash, many customers receive money - but some companies are not giving enough time for the customer to decide if they wish to accept the offer.

Gold finger: Often customers are unable to negotiate a higher price, or reject the offer, as the jewellery has already been melted down

This means they are unable to negotiate a higher price, or reject the offer, as the jewellery has already been melted down.

Each company has agreed to change their business practices after concerns were raised that people were being 'locked into' accepting offers for gold.

A further two companies – CashYourGoldNow and Money4Gold stopped trading after the OFT approached them about improving their business practices. St Albans-based Money4Gold is now in voluntary liquidation.

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Heather Clayton, Senior Director of the OFT's Consumer Group said: 'These days we see more and more new business models which involve consumers distance selling goods to firms. These options are good for consumers, providing business practices are fair.

'Any companies operating similar business models must make sure they treat consumers properly and provide clear information on how the service operates so that people make informed decisions about whether they wish to part with their possessions.'

Following the OFT probe, the firms have agreed to:

• Provide people with the option of receiving either a quotation for their gold which requires positive acceptance, or just a payment for their gold, and also display both options and the risks of each payment option clearly and prominently;

• Provide consumers with clear information on the prices offered for gold, including information on the weight and carat of the items assessed;

• Provide consumers with clear information on other important features of the service, such as whether gemstones are purchased or returned and if the consumer sends a gemstone the risks of damage or loss;

• Make clear, when referring to the 'high price' or 'top price' paid for gold, that the prices offered to consumers are based on the scrap or smelt value of gold.

Postal gold buyers and temporary shops and stalls in towns across the UK that buy jewellery, has grown in popularity in the last year.

This is because many want to cash in on the all time high gold prices.

There has also been much more prominent drives to buy gold, with TV adverts for a variety of gold buying companies constantly being pushed. Research from Which? showed some companies that advertised on TV offered an average of just 6% of the gold's retail value.